During the month of May equity markets maintained their upward trajectory while volatility has generally diminished. Earnings forecast keep being revised higher, which together with continuous support form Central Banks and Governments, keeps investors optimistic. Meanwhile, commodities kept rallying, led by oil, while industrial metals kept performing, especially Iron Ore. The debate remains the same, is inflation transitory? Central Banks and the bond market think it is. Banks and Energy shares tell you a different story.
Our take is that there are some factors both in the supply and demand sides that are transitory, but the pandemic has meant some major changes in consumers behavior, which could lead to higher prices for some goods. In any case, in the long term it is difficult to have sustained inflation with the increasing level of debt both at the government and the private sector and unemployment level well above than before the pandemic. Regarding the FED and the debate whether it should be diminishing asset purchases or not, our take is that, while the US government deficit remains as it is, it is difficult for the FED to pull back. They will try to inform markets about their intentions well in advance and being as tame as possible in order to avoid a ātaper tantrumā moment
Negative month for the strategy as cyclical currencies kept rallying, especially CAD, supported by the spike in oil prices. Closed profits during the month contributed circa 1% to performance, which brings YTD closed profit to 7%. Some of our pairs have kept stretching, which means that current opportunity has improved. Protection levels remain substantial as the small movements in our favor are well used to generate profits and protect more each position, which means that for some pairs and combinations we currently have more protection than Total Protection level. All this translates into one of the best information ratios the model has ever shown, very close to the opportunity witnessed during the trough in March 2020.
In terms of exposure, we have increased our longs in JPY and USD during the month and diminish the CHF long exposure. In the short side of the portfolio, AUD was diminished while NZD and CAD short exposure was increased.
Below we show you the October cards of all our funds.
As always we remind you that we are at your disposal for anything you may need.
This document is provided for informational purposes only and cannot be considered in any case as a contractual element, a recommendation, personalized advice or an offer. Nor can it be considered as a substitute for Key Information Document (KID) or any other mandatory legal information that should be consulted prior to any investment decision. In case of discrepancy, the legal information prevails. All this legal information is available at the offices of Grantia Capital SGIIC, SA and on its website: www.grantiacapital.com